The Zero-Based Approach: Welch's Christine Kwiat on Fueling Product Innovation

Welch’s has been successfully introducing new products for more than a century, and as such knows a few things about overcoming barriers to success — including just way it’s so dangerous to fall in love with a product. Whether it’s right-sizing the staffing or knowing the magic question to get the necessary resources, the potential for a product launch misstep is vast, and learning from previous wins and losses is essential. Read on for an insider view on the food company’s product launch and project management strategies from Christine Kwiat, Welch’s VP of innovation. Tim Denman: Welcome, everyone, to today’s webinar, “Make Every Product Launch a Success: A Conversation with Welch's VP of Innovation,” which is hosted by CGT and presented by Sopheon. I'm Tim Denman, editor-in-chief of CGT, and I thank you for joining us today. New product innovation is the lifeblood of the CG industry. Leading CPG companies like Welch's must continuously improve existing products, as well as introduce new products to the market, if they're going to stay ahead in the competitive global marketplace. According to recent research conducted by CGT, nearly 40% of new products failed to meet profit objectives, and with 30% of CPG revenue coming from products that were introduced in the past three years, an increase of just a few percent percentage points could have drastic improvements on profitability and product success rates. With us to explore why new products fail to meet revenue projections, common product launch challenges, new product management strategies, and how CPG leaders can implement a more structured and effective approach to product innovation are Chris Kwiat from Welch's and Brad Eby from Sopheon. Chris and Brad, thank you both for joining us. Why don't you both take a moment or two to introduce yourselves and the role at your respective companies? Chris Kwiat: Thank you, Tim. I'm Chris Kwiat, the head or VP of innovation at Welch’s. In my experiences, I've been able to work in both established and turnaround environments with the opportunity to either lead or be a part of a cross-functional team that's launched over 200 projects. I've been able to have different lenses on that, from being the person who actually launched it and a product developer, to being a leader, and now, in my role as the person who has a cross-functional team charged with it. At Welch's, my focus is the goal of innovation and adding value back to the growers. Welch's is a co-op of farmer growers, and we are using innovation — or the goal is to add value to the organization through innovation — to establish an approach and some rigor around how to do that, not just what the top line deliverable is. Brad Eby: Good afternoon. I'm the director of CPG business development for Sopheon Corporation, a leading provider of enterprise innovation management solutions. I've been with Sopheon for about 12 years, working with CPG partners. Our product accolade enables clients to create a continuous pipeline of highly innovative products and help to get the products to market quicker. Denman: Thanks, Brad and Chris. Much of the conversation today will be based on CGT's recent targeted research report, “Successful Product Introduction Requires a Structured Approach.” The report benchmarked the current state of product innovations and launches, as well as uncovered many interesting statistics, which we'll be exploring and dissecting today. For a deeper look at the data, we encourage you to read the full report. For now, I'm going to turn it over to Brad and Chris, who are going to discuss some of the key findings. Eby: The topic of today's webinar is “Make Every Product Launch a Success,” and I'm confident that this is the goal of everybody on the call. We’ll discuss what success means, what some of the barriers are that we're seeing in today's market, and to help ground this discussion in reality, we'll reference the results in the detailed survey that recently went out on product launches. To begin, let’s focus on the word success. What does success mean? How do we measure or define success? Ultimately, it comes back to achieving financial goals. These goals are defined at the category, business unit, or corporate level and are typically tied to specific initiatives or corporate directives. Ultimately, they are a statement of value goal, defined by financial targets such as revenue, volume, and are captured in a multi-year plan. As growth plans are measured or defined, they’re often digitized because that's the only way to measure against them, and measure actual performance, or find gaps. Oftentimes, you will replan, remeasure, and replan and remeasure — it becomes a vicious cycle when a success formula isn’t in place. How do you deliver on these growth plans? This is how we define success, to deliver on those plans. It is not easy. It's difficult in today's world with global digitization, fast-changing consumers, small company disruptors, and of course, the global pandemic is creating a challenge. The success or failure at the corporate or portfolio level is simply a roll-up of the successes and failures that happen at the product launch level. Getting the right product to market at the right time and delivering on financial targets will lead to the ultimate success at the corporate level. What we're seeing is that this is still a challenge. Nearly 40% of products failed to meet profit objectives. This is actually down a bit from the last 2011 study where 50% we're making some progress, but it's still a challenge — 40% of new products failed to meet profit objectives. Why is that? We have a little bit of insight, it's not a silver bullet. We don't know exactly what the exact answer is to this, but we do have some insights. Three of the four top challenges are due to poor upfront work, and the fourth is a missed market window due to poor planning and execution. This is a challenge that exists today, and is contributing to the failure. This set of challenges and upfront process failure that's happening. Chris, do you have some insights and thoughts on this? Kwiat: It makes me sad. I'm happy that there are still some successes, but none of these things surprise me, nor would they surprise anyone on this webinar. When I saw the results, I thought through the higher costs to get a project completed as we are being pinched everywhere. Everybody is looking at scrubbing their costs, that doesn't surprise me. Non-differentiated projects, no. The environment has had a proliferation of new innovation, and the way we approach that has not been diligent enough. The late-to-market and marketing analysis lacking are all a result of the environment we're in. When we get sucked into day-to-day work — for example, every single day I fight my calendar and myself — to work on the innovation priorities of the company. That critical day-to-day doesn't allow the diligence needed to have a disciplined approach to innovation. It doesn't surprise me. Let’s talk about how we can be successful in this space. Some approaches that can be helpful is to understand the role of innovation at your company — ask the hard questions: What is innovation supposed to deliver? How do the leaders at the company view it? That's number one. How do we make decisions at the company? Understanding how leaders make decisions specifically around innovation takes a bit of detective work. I've asked those questions of the stakeholders, tried to document them, and written down that process from idea to launch. What I’ve found is that there's not good answers around how to get a product out the door. Eby: It’s that decision process that you're referring to, that creates the challenge. In fact, even if you have this decision process in place, which a lot of companies do, whether it's Stage-Gate® or whatever the process is, we're finding that 54% only somewhat or rarely adhere to the process. Even if you understand how to get a product to market, people aren't following it. The other buzzword we're hearing a lot of is this concept of Agile. It's one of those things where we have to be iterative. We have to get the product in front of clients or prospects early in the process. We want to iterate on it, build that into the NPD process. We discovered, despite this buzz, more than 40% of companies are not even using any form of Agile today in NPD. For those that are, the majority are only somewhat or never leveraging it. So, is it really a buzz? Is it being used in anything? Kwiat: I have strong opinions on the word Agile. Agile, now, is a word that's being thrown around to mean faster process. However, if you do some digging on Agile, it's a project management approach methodology that helps facilitate the process. Every time I hear that word, Agile, — I've heard it from upper management and other leaders in circles around innovation — I wonder if people know what it means. That's the crux of it. These results don’t surprise me. There's buzz around Agile because we aren't using it, which also doesn't surprise me because it takes change management and education to understand what Agile means and how to facilitate it. There is collectively a knowledge gap on how it can drive innovation success. I’ll jump in here, too, on why people aren't following the process. There are many, many reasons that the innovation process is not being followed. The most common things are that traditional approaches are slow, methodical, and linear. They're too much work. People don't have time. I always do what I call “what's working, what's not working” when it comes to innovation. If I had a word cloud for this, it would say, “slow.” Someone at Welch's even said they called Stage-Gate®, hate gate, which has become the sentiment. That's the most common thing, but there is some ownership that everyone at the company has to take in the process. As I mentioned, document and ask curious questions: What is the process from getting something from an idea out the door? Many companies call it many different things. Ask the questions, document it. The second thing is to ask about how to make decisions around innovation. The foundational reason for all this negativity around the process or not using it, is that we're taking out-of-the-box approaches. Whether it is Stage-Gate® or something learned from another company — we all take something from another company, external, a book, or a process — and try to jam it into the new company to be successful. I joke that if all of us on this webinar would share a presentation, we’d all be reusing the same presentations at all our different companies. We all do that to be efficient, our brains say, "Do I have an old presentation? Did I see a presentation template on anything?" That happens a lot with the innovation process because it's hard to customize to what your company needs. Ask a lot of questions and spend time on it, take an out-of-box approach. Second to why we're not using the process is the staffing. The way we staff the innovation process seems to be off. For example, anyone on the phone or all of our experiences, you need a person to facilitate and be the process owner. There needs to be a process owner for innovation, and that logical fit is not always the detailed engineer person. Many companies take a resource that has engineering capabilities because that is viewed as the talent that would manage a process. Then, they have that person facilitate or become the process owner of the innovation process. That doesn't allow the creativity and flexibility that is needed in a process. Using an out-of-the-box process from another company or the internet, plus talent that is around a skill set, process management or engineering, doesn’t facilitate the best outcome in this space. The staff needs to have creative individuals that can be flexible — that could be an engineering personality type or background, but it's a different type of skill set for an innovator. Then, what makes people not want to follow the process, is people are forced into compliance with this process. What we're doing at Welch's is a zero-based approach to building an innovation process. That means, what does Welch's need, or what does your company need to be successful? What questions need to be answered in innovation to get to the next big decision? Once you're able to customize that, it becomes unique to the company, and the people want to use it and be a part of that zero-based approach. Eby: That zero-based approach will vary company to company, or even product-to-product, project-to-project. We've seen this over and over again: here's the Stage-Gate® process, everybody must use this process, but it doesn't fit, so now we'll create three processes — a just do it, a moderate risk, and a high risk — and jam them all into that process. The reality is that every project may be different in the needs of the governance, the decisions that are made, and the questions that are asked throughout the process may change. There should be flexibility to have a decision point, and in fact, you have to be able to kill a project at some point. You have to have the governance and have those questions asked. However, it has to be the right question, and it has to be fit for form. It needs to be the right process for the right projects and the right company. Out-of-the-box does not work, and that’s been learned over and over again. Kwiat: How does Welch's find the balance between the rigid practices of something like Stage-Gate® and practices that are too loose like Agile? Both of us have touched on this. What we’re doing, and we're in process, is taking elements that are deliverables from Stage-Gate® and pairing them with the project management style of Agile, including weekly standup meetings, a board of things that need to be resolved. At Welch’s we’ve gone back to the zero-based approach. How do decision makers decide how to move something forward, and what is the best tool? We're looking across what the toolkit was for Stage-Gate®, and fitting together bits and pieces from Agile and traditional Stage-Gate® to make it right for Welch's and our innovation. That's how I'll answer it. Eby: To reinforce what we’ve been sharing, the study showed that 60% of companies have not yet found the right balance between structure and flexibility. There is still a contrast of needing to be creative, not stifling creativity, but being able to make decisions and make database decisions. Finding that right mix and right balance is a challenge for everybody, which is shown in the results of the survey. Another interesting concept here is resource planning as a barrier to success. When we talk about barriers to success, what are the following challenges, the highest challenges that are stopping you from being able to prioritize your product portfolio? Resource planning ranked the number one and two issues. When you think about prioritizing, you want to prioritize based on what the objectives are. What are the corporate objectives? What are the strategies? What is the company trying to accomplish? Then, do the products fit into those strategies? That's how it should be prioritized, what's the best project to meet the strategy. Then, resources are a measure of whether or not those projects can get done. It's not, “should I do this based on the resources?” rather, “can I get it done, and do I have the resources to get it done?” This is an interesting dichotomy for companies to say, “this is our challenge to prioritize our portfolios.” Chris, what are your thoughts? Kwiat: This topic could be a whole webinar on its own. It bears repeating that resources, the number of people in the organization, should not be facilitating or dictating what the priorities are. That is a massive challenge. The first question I get in any new role, especially regarding the innovation process — a Stage-Gate® process, or Agile process — is how many resources do you have, and I'll tell you what projects I want to do. I always say in a very nice way, "Well, what is the strategy of the company? What are we trying to get done? How are we going to go about doing that? What strategies, goals, and projects are needed to make those things happen?" The teams around every organization can tell you what is needed to be successful to read those objectives. It’s a very backwards metric to do it the other way, and have the business priorities as a company be at the mercy of the number of resources, as aggressive as that sounds. We can right-size-it and say what's needed. Then, the discussion can be around if we are willing to add resources or not, willing to add budget. Sometimes resources are budget dollars in order to support those things. Then we can plan around that. Another interesting thing at Welch's is a new approach that I've taken. If you are able to structure resourcing and budget by project, it could be a huge item to unlock on prioritizing the list. Let's say you have a project within the organization, let’s call it Project Juice. Project Juice is going to cost me X amount of money to get from idea to launch. I'm going to make a guess on that, and X amount of resources from bodies from beginning to end. I'm going to try to predict that based on experiences in asking people within the company. Now, I have time, energy, or time it would take people and dollars, needed for that initiative. It's much easier to prioritize or deprioritize a project with a "spend" attached to it, versus having a budget or headcount distributed over multiple projects. I can say to the organization, "do we want to do Project Juice with this spend and headcount needed or not?" That has been really important, maybe a simple way to do things. A lot of us don't do financial planning that way in our budgets, but it has been so much easier because the management and executive team can react to Project Juice, versus line items or people's headcount in a budget. Just one potential solution to resource planning as a barrier to success. Eby: That enables a much needed capability for portfolio impact analysis — being able to understand what the impact is in the portfolio if this project is taken down. I want to know if this is a high value, high-cost project that could displace some of these other projects. It's not based on whether I have the resources to do it, but on a comprehensive impact analysis on the portfolio. Can this be taken on, if so, what should be canceled based on the prioritization. Being able to do those what-if scenarios and impact analysis is a resource cost component. Another measure of success looking at your portfolio balance. Again, it's back to balancing risk in your portfolio, is this concept of vitality index. Vitality index is the percent of my revenue from new products. Is there enough risk in my portfolio? Are there enough highly innovative projects versus lower risk line extensions and those types of projects? Right now we’re seeing that this is a pretty high number. A surprising 28% of revenue in the survey comes from products launched within the last three years. These are companies that are taking risks. This number is growing. Companies are recognizing that they need to take that risk, they need to balance their portfolio with higher value projects, higher risk projects. But having that process in place makes it even more critical. Adhering to that process, to manage the risk in those higher levels of innovations. If you're not, those 40% failure rates that are happening on these high-risk projects are making your losses much higher. This is an important concept — balancing your portfolio risk by looking at your level of innovation within that. Kwiat: This is something that’s important to acknowledge. When you look at the line extensions, it says 43% are highly innovative, 28% are in addition to risk, but it also comes with time and energy. To do innovation right there is a commitment that needs to be given to it. The line extensions still require thought, but you don't need the depth and robustness of thought to be successful to mitigate risk. It's encouraging to see that it's considered a measure of success for innovation. We need to continue to manage how much of the portfolio needs to be highly innovative. Some companies call these big bets versus the line extensions, and what type of commitment does it take to get that done? Years ago I worked for someone who said, "I don't care how we get the growth, I just want it." However, we do care where the growth is coming from and the mix. Growing through line extensions might be more cost effective and easier than growing with highly innovative products or projects, which take longer and require more spend. You do care if you want to be an innovative company and have a sustainable pipeline long-term. You have to invest in it in a different way than you're investing in growth and line extensions, or even distribution growth. Marketing 101 tells you it's cheaper to grow total distribution points (TDPs), versus creating the new. If you follow that logic, creating the new comes with a different price tag and talent poll. We need to be mindful of the mix. There's no right answer here, that's where I've struggled, to be transparent. Every time I come to a company they say, "What is the right project mix, Chris? What percent of innovation should be line extensions, versus revisions, versus innovative?" My question is always: How much of an appetite do we have? What are our goals as a company? Do you want to be the leader in innovation for Welch's or wherever it may be? Do you want to be a leader, and on the leading edge? Then you need to index highly on innovation and need to invest in it. If you want to be a follower or fast follower, you might do things differently. Those hard questions need to be asked in the mix. There’s a question here: We have a hard time seeing what our resources are working on that is tied to corporate priorities. How does Welch's do it? I’m going to answer this a bit differently and share how I want us to do it and what we're working towards. We are working on a project right now with Sopheon. I’m going to be a bit tactical here, but it's the right thing to do, however you do it. We want to have the list of corporate strategies and then the projects that are in support of those strategies. For example, say you have a corporate strategy around sustainability or plant-based protein. That is a defined way we're going to grow the company through sustainability, different sustainability. I need to see what projects click that button. If I was tactical, I'd say, "There's a dropdown menu that says, click the corporate strategy this project is supporting." Then I would go, "How many resources holistically spent time, money, people are going to be allotted towards that?" Then we look at all 20 projects, 10 of them are moving forward sustainability. Of those 10, it looks like five are drawing a high amount of resources and complexity. That's how we aspire and are planning on linking them together, so that we can show them on a dashboard and get visibility. The next question, which we’ll discuss at a later date, is what is the goal? How do you optimize a portfolio? What do you do with that information? What is this? So, what? That's how we're doing it or aspire to do it. Eby: I’d like to quickly cover post-launch analysis. This is a brief look at one way of understanding whether you are successful or not, and that is to look backwards. To pull point-of-sale data information compared to what is actually projected in the business case, in the governance process, what was projected in terms of financials, volumes and so on, and what do we actually do from a point-of-sale? There's challenges with that, being able to tie SKUs to projects, and there's a number of challenges. What we're seeing is that almost 40% of companies aren't even doing that. How do you get better at something if you're not looking backwards? It's a recommendation from experience that you need to look back, to have that connection between what you actually did, what you projected, and understand why those results weren’t achieved. What assumptions were made? What were the gates that were missed? What happened along the way to cause you to miss those projections? If you can’t reflect on these points, you can't address them, which is a very important concept. Chris mentioned that we've been working together, so I wanted to provide a quick overview of Sopheon. Welch's has embraced our technology, which we call Accolade, to help during their innovation journey. Sopheon is a publicly traded firm providing enterprise innovation management solutions, and is based in Minneapolis, Minnesota. We help our clients create a continuous pipeline of high-value innovations, new products, platforms, programs, and help get them to market faster. We do it through a state-of-the-art software, fully-integrated system that digitizes from strategy setting all the way through execution. The platform looks a little bit like this. It's a decision support platform that starts with the digitization of the planning, identifies what strategies to work on, and digitizes those. It is able to identify gaps in those strategies, fill them through campaign-driven ideation, and move those projects from ideation into whatever the product development process is — whether it's Stage-Gate®, standardizing on that, implementing minimum viable product approach to Stage-Gate® or Agile. Then, on the upper left, being able to look at the portfolio, optimize the portfolio, ensure the right mix of products that are aligned with what has been digitized on the strategic planning side of things. This is the platform, what we do for our clients, and the result is being able to get products through efficiency gains, get products out the door faster, and minimize the upfront investment over time. You’re getting the products into the market 15-30% faster and increasing the value of the portfolio because you've got the right product mix in the market and you're increasing the success rate of those projects up to 50%. Ensuring that those financial targets are hit for those projects and, ultimately, achieving what has been defined as success along the way. This is what we do with our clients. Denman: Great presentation, Chris and Brad. We have a few more questions here for you. Are you seeing companies actually cancelling projects earlier in the process using innovation governance? Eby: We are, actually. We've seen a lot of clients go from a tunnel to a funnel. It's quite a concept, quite a change, but it forces the questions to be asked. Having the right questions ready to be asked at gates, if you're using the Stage-Gate® process, because they can't go on a gut feel. You have to be able to make an investment decision based on data, and the data is captured along the way. We're seeing a lot more of that, helping clients to move from a tunnel to a funnel, being able to cancel those projects when needed, to free up resources and dollars for higher value projects. Denman: It's better to get rid of it early than to launch and fail. Can you provide any real-world examples of product launches that failed and how could they have been avoided by embracing some of the strategies and technologies you discussed today? Kwiat: There's a couple of things. I won't use the company name, but I'll share a little bit. I was on a project where we asked people to take on a new behavior. It was a lunch kit. We were asking people to buy the elements of this kit, and then assemble something at work and heat it up in the microwave. Knowing what I know now, I was very early in my career, I was a product developer at the time in R&D. We were not using, when I was on this team or at the company, any form of an innovation process or Stage-Gate® that was documented. Now, what I know all these years later — living in this space of innovation and process management for innovation — we dramatically missed a robust market analysis. We lightly touched on a differentiated product looking at the competitive set, understanding the consumer's need for the product, and how it was different from what they were already eating and using. Then, more aggressively, I learned that new behavior is very difficult, it’s difficult to create a new behavior. If we would've been using or talking about an innovation or robust process, we would've killed that early on before it launched. When we launched the product, there was a lot of time, energy, and resources that got sucked up. If we had used tools, we would've realized before we even hit development. Back to the conversation around the tools, it bears noting that a data-driven discipline process is what's needed. We didn't take the discipline, we didn't have a fact-base to work from, and we didn't evaluate it. If we would've had these tools or a process to do that, we would've likely killed or recycled that project to make it a little more robust. Denman: When it comes to the idea of killing a project, Chris, like you mentioned, how do you get executives to buy into the idea of killing a project when so many resources, both human resources and hard money have already been devoted to developing this product. How do you get buy-in from executives that you need to readjust? Kwiat: Buy-in to kill is how I hear the question. It's a hard one. We need to make sure executives understand the cost in marketplace failure versus before it even leads to the building and facts. We have to have facts. I do this myself, but I'm not meaning I'm an expert on all of this stuff or that it's easy. However, we need to show facts on other things that didn't work, facts showing the consumer learning we have on this project before it goes out the door. When we are using intuition versus a fact-based, it's very hard to convince me, management, and leaders that something should go forward or not. People also get passionate over a project and fall in love with it. That's why we need to balance that with facts. I don't want to hear we love or like this project. I wouldn't be happy if at a performance review, someone said, "I really like Chris. I would prefer, “Chris has launched four successful new products in the last two years,” than, “We like her." I'm being ridiculous here, but it's the same with a kill. Maybe there's a way to pull facts around the kill and compare them to facts around things in the marketplace that didn't go well either within your own company. Sometimes you have access to that fact base, but if you don't have access to one, I call it “phone a friend”. Sometimes I'll get anecdotal data. Brad and his team have some data that they can help with, and there's other places to get data on what the cost of in-market failure is versus before it leaves the building. Eby: One thing that's hard to kill is having a visible backlog of projects to move into the pipeline. Capturing those, getting them in the system, being able to do that impact analysis to understand which projects may have to be cancelled. What can be brought into the backfill with a good data-driven decision? Denman: Can you point to any recent product launch home runs, either at your company or another that highlights some launch best practices. With only a few minutes left, let's end on a high note and talk about success. Kwiat: Although it's too early to call, I do have some data. We have a product in test right now on the east coast at Welch's. It's too early to provide a definitive answer, but the reason I want to bring it up is hopefully it'll become widespread and everyone will see it. It's in the marketplace, so it's not a huge secret. It's a lighter, crisper grape juice that we have out. We used a new process that took us from idea to in-market tests in six months. We used the zero-based approach, and also supplemented with an Agile project management skill set. There’s a couple really cool things, which is why I say not to lose hope, it can happen. This was one of the first things this team did when I joined Welch's. We got a short six-month project, and asked for one of the leaders to dedicate towards this team. Sometimes there were weekly meetings, other times we’d meet several times a week to move things forward and make decisions. We took the best of some of the Stage-Gate® deliverables, such as what’s needed to make a resource decision. We would answer that question, and go get the resources. Then, what’s needed to feel good about the product or the bare minimum needed to feel good about the project? That was the next step. Using these approaches, we kept moving along at a rapid pace. The magic was asking for a discrete set of resources at a discrete set of time and having robust discussions around each area. There was dedicated time to talk about market attractiveness and spending 30 minutes on it, as well as dedicated time to talk about the financial potential reward of the project. A huge a-ha moment for me was how much time was spent in a traditional process doing the key elements of business case development. It wasn’t not much. When we spent 30 minutes per element, we got a lot farther a lot quicker. That's a testament of how busy everybody is. It's possible and it’s doable — it wasn’t a huge ask of the organization for a six-month project. Denman: Thanks, Brad and Chris for joining us, thank you everyone for listening, and thanks to Sopheon for their support. Have a good day, everyone.

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